Today I Paid Our HELOC Down $1,000

Our finances are complicated.

We’ve always had rentals. Just one to start with, which Jay bought way back in ’79, shortly after he got out of high school. I always joked that he bought it the day the real estate market peaked in Denver.

Good Lord, that was a millstone around our necks for years. I hated it. It didn’t cash flow and, once we had kids, money was tight. We were loathe to miss even one month of rent. Hence, we chose some bad tenants a couple of times, out of desperation. Short sighted and dumb!

But, it ended up being a good thing.

We were already landlords and it paved the way for us to buy another rental, a small house, in 1995 when the real estate market was booming. Then another in 1997. By 2005, though, the foreclosure trickle had already started in Denver. It wasn’t a tsunami, yet. In fact, the market was still pretty hot. But every week there were stories in the business section about the mounting number of foreclosures. The writing was on the wall and we decided to capitalize on it.

I spent a few months learning about Public Trustee foreclosures and started monitoring the auctions. We sold the condo for a nice profit. (It took about two years for that buyer to lose it.) We refinanced our house and took out some cash. We had some seed money and started dabbling. It started slowly. That first year we never ended up with a property, but we made about $10K in interest from properties that were redeemed by other investors. (Too complicated to get into, plus the rules changed in ’08.)

I really started to figure things out and over the next five years we made some significant money. It was a LOT of work, but it really paid off. We flipped a lot of properties. We picked up a few more rentals. We got a HELOC on our primary residence. We got three HELOCs from Washington Mutual on three of the rentals – and when I opened the paper and read that WaMu was in trouble I immediately raced down to the branch and maxxed out all three HELOCs, assuming that they’d be frozen. We were lucky and only one was subsequently frozen.

Anyway, fast forward to 2011. The Denver market is in the tank. It’s been getting harder and harder to make money in the foreclosure market, as there as SO many players and many of them are buying to rent and hold vs. flip. They could afford to outbid the flippers. In fact, we lose on two out of the six deals we do. Not a lot. But I am totally not interested in busting our butts to lose money on anything!

So, instead of looking for properties to flip, we take advantage of the market and buy our dream house. It had been on the market for two years and the sellers finally agreed to a price that was $75K less than what they’d paid for it ten years earlier. OUCH! And they’d spent money on the house in the meantime! We use lots of the money we’ve made to make a 50% down payment, since we can’t qualify for a loan to cover more than half the price. Lenders don’t like non W-2 earnings…

We keep and rent out our old house, as we don’t want to have to sell in such a terrible market. And I start the process of streamlining and simplying our finances.

Fast forward to today. It’s early in 2013. We recently sold one of the rentals (the one we hated) and paid off that mortgage. Hallelujah!!! We just refinanced our new house. We’re putting our old house on the market in May. It should sell quickly, assuming the market, which is on fire, stays that way. We will pay off a mortgage and a HELOC when that happens. Can’t wait!!

We will still have three HELOCs on three of our other rentals. Two are paid down. I can dip in and out of them, as necessary, if and when we ever find another property to flip. It’s been a full year since we flipped one! The frozen HELOC, however, is borrowed against to the tune of $160K. We can’t borrow any more against it, as it’s frozen. And anything we pay down can’t be gotten back out. The interest payments run about $500/month. And it’s an adjustable rate. One of these days, it’s going to adjust UP. Next to selling our old house, paying down this HELOC is goal #1 on my list.

Today, I put $1K towards it. And I hope to repeat this regularly until the whole thing is paid off. Some day soon (I hope) we will have one mortgage on our primary residence and a couple of HELOCs that are paid down and only there to dip into when we find properties to flip.

Sounds like heaven!!

 

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